Tufts study: TPP trade deal would lead to job losses in all countries, US would be hardest hit, exacerbating 'a multi-decade downward trend' in income inequality

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Jan. 2016 Tufts study: "TPP would lead to higher inequality...redistributing income from labor to capital in all countries. In the United States, this would exacerbate a multi-decade downward trend."...

Jan. 2016, "Trading Down: Unemployment, Inequality and Other Risks of the Trans-Pacific Partnership Agreement," Jeronim Capaldo and Alex Izurieta with Jomo Kwame Sundaram, GDAE Working Paper 16-01

 

"Proponents of the Trans-Pacific Partnership agreement (TPP), the trade and investment treaty recently agreed by the United States and eleven Pacific Rim nations, emphasize the prospective economic benefits, with economic growth increasing due to rising trade and investment. Widely cited projections suggest GDP gains for all countries after ten years, varying from less than half a percentage point in the United States to 13 percent in Vietnam.

In this GDAE Working Paper, the authors employ a more realistic model that incorporates effects on employment excluded from prior TPP modeling. They find that benefits for economic growth are more limited, and they are negative in some countries such as the United States. More importantly, they find that TPP would lead to losses in employment and increases in inequality. This is true particularly for the United States, where GDP is projected to fall slightly, employment would decline, and inequality is projected to increase as labor’s share of income falls.

For this analysis, the authors use existing projections of TPP’s trade impacts and derive alternative macroeconomic projections using the United Nations Global Policy Model (GPM). This model provides more sensible projections because it allows for changes in employment and inequality and incorporates the impact those changes have on aggregate demand and economic growth. A previous GPM-based analysis of the Transatlantic Trade and Investment Partnership (TTIP) between the United States and Europe projected rising unemployment and inequality in Europe with negative impacts on aggregate demand and economic growth.

In this TPP study, the authors find:

• TPP would generate net losses of GDP in the United States and Japan. For the United States, they project that GDP would be 0.54 percent lower than it would be without TPP, 10 years after the treaty enters into force. Japan’s GDP is projected to decrease 0.12 percent.
  
  
• Economic gains would be negligible for other participating countries – less than one percent over ten years for developed countries and less than three percent for developing ones. These projections are similar to previous findings that TPP gains would be small for many countries.
  
  
• TPP would lead to employment losses in all countries, with a total of 771,000 lost jobs. The United States would be the hardest hit, with a loss of 448,000 jobs. Developing economies participating in the agreement would also suffer employment losses, as higher competitive pressures force them to curtail labor incomes and increase production for export.
  
  
• TPP would lead to higher inequality, as measured by changes in the labor share of national income. The authors foresee competitive pressures on labor income combining with employment losses to push labor shares lower, redistributing income from labor to capital in all countries. In the United States, this would exacerbate a multi-decade downward trend.
  
  
• TPP would lead to losses in GDP and employment in non-TPP countries. In large part, the loss in GDP (3.77 percent) and employment (879,000) among non-TPP developed countries would be driven by losses in Europe, while developing country losses in GDP (5.24%) and employment (4.45 million) reflect projected losses in China and India.

About the U.N. Global Policy Model:

Documentation of the model, which is housed at the U.N. Commission for Trade and Development, is available in the following UNCTAD paper:

"The UN Global Policy Model: Technical Description," by Francis Cripps and Alex Izurieta, May 2014.

Related Commentary:

Modeling TPP: A response to Robert Z. Lawrence, Jeronim Capaldo and Alex Izurieta, GDAE Globalization Commentary, February 3, 2016

 

Press Coverage:

Clarifying my take on dueling trade models, Jared Bernstein, On the Economy, Feb 2, 2016
TPP Debate Rages On, Victoria Guida, Politico, Feb 2, 2016
Economists Sharply Split Over Trade Deal Effects, Jackie Calmes, The New York Times, Feb 1, 2016
Dueling TPP Studies, Adam Behsudi, Politico, Feb 1, 2016
TPP in the Spotlight as February Signing Date Approaches, Bridges,Volume 20 - Number 3, Jan 28, 2016
Modeling the economic impact of the TPP, Tracey Samuelson, Marketplace, Jan 25, 2016
Pacific Trade Pact May Spare U.S. Workers Overall But Slow Factory Hiring, Study Says, William Mauldin, Wall Street Journal, Jan 25, 2016
TPP's Economic Impact Will Be Fewer Jobs, More Inequality, New Study Says Daniel Tencer, Huffington Post Canada, Jan 20, 2016
'More Realistic' Modelling Of TPP's Effects Predicts 450,000 US Jobs Lost, Contraction Of Economy, Glyn Moody, Techdirt, Jan 19, 2016
TPP destruirá empleos en todos los países socios, Roberto Morales, El Economista, Jan 18, 2016
The TPP Erodes Public Policy To Benefit The World's Plutocrats, Sujata Dey, Huffington Post, Jan 18, 2016
'Unemployment, Inequality and Other Risks of the Trans-Pacific Partnership Agreement', TWN Info Service on Free Trade Agreements, Jan 15, 2016
Obama makes TPP push in SOTU, Adam Behsudi, Politico, Jan 13, 2016"...

http://www.ase.tufts.edu/gdae/policy_research/TPP_simulations.html

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Ted Cruz stunningly joins the Establishment, April 2015 article:

"Authored by establishment GOP Rep. Paul Ryan (R-Wis.) and heretofore "conservative" Sen. Ted Cruz (R-Texas), the op-ed in The Wall Street Journal is a compilation of talking points and slick dodges....Trade is but a minor part of the matter. No less an authority than The Washington Post stated in an April 13 editorial that the treaty and fast track are "about geopolitics as well as economics....These treaties are in fact far more about "politics" than economics or trade....The real thrust of these treaties: the expansion of international and globalist interests."...

4/22/2015, "Ted Cruz joins the establishment," The Hill, by Rick Manning, contributor

"Establishment, globalist advocates published what will go down as the most disingenuous, deceitful and outright dishonest promotional piece on behalf of the so-called fast-track trade authority that could have been written. Authored by establishment GOP Rep. Paul Ryan (R-Wis.) and heretofore "conservative" Sen. Ted Cruz (R-Texas), the op-ed in The Wall Street Journal is a compilation of talking points and slick dodges. It is textbook propaganda that would make the disinformation experts of the KGB blush.

The dynamic duo start by asserting that the U.S. must "strengthen the country's bargaining position” by giving President Obama fast-track powers. Really? The GOP Congress thinks it is vital to our national interest to expand the powers in Obama's hands? And, what exactly "strengthens" our bargaining power? So the only way to win a deal is by convincing foreign governments that the U.S. Congress will be limited in what it can say on the matter? Are we to tell the world that the people and their elected representatives will be sidelined so a "deal" can be done?
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Next, Ryan and Cruz assert that the American worker has been placed at a terrible disadvantage to workers in the rest of the world and that we have to give Obama more power in order to address this serious problem. But, of course, nowhere is there a mention of the fact that a big part of that "disadvantage" is currency manipulation and other financial gimmicks — issues that are expressly kept out of the trade deal. I guess nobody told these gentlemen that the primary weapon being used against American workers and business is not going to be discussed. Had they been allowed to read and review the so-called deal — the Trans-Pacific Partnership — they might have known that. But sadly, the Obama administration has kept the "deal" under lock and key — virtually nobody has been allowed to view it.

But this is a minor matter compared to the bald-faced falsehoods that follow. The congressional odd couple assert that Congress will demand three things from Obama, three "requirements" that will protect the nation. In truth, all three are hollow shells; the tools of bait and switch that have used to con America in the past. And what are three shells of the con game?

First, it asserted that there will be 150 "specific negotiating objectives." Sounds good, except these objectives are nothing more than suggestions. If Obama comes back with a treaty and none of these "objectives" are included, there is no effect. The treaty will still get the up-or-down vote. No amendments will be allowed to be offered. No two-thirds ratification vote in the Senate will occur. And of course, at that point, all the special interests — having been fed their fill — will demand passage. Are we to believe that Ryan and Cruz will vote against the treaty if the 150 "objectives" are not included? If that is the case, why do they not say so?

Second, it is asserted that the administration would be required to "consult" with Congress over the course of final negotiations. This is the "kissing your sister" argument — no meaning and slightly discomforting.

Finally, it is claimed that giving Obama [and future presidents] more power will enhance the power of Congress and thereby the American people. This is simply a lie. Under the authority Ryan and Cruz want to give the administration, the powers given Congress under the Constitution are suspended. No amendments are allowed. U.S. law will be subjugated to a treaty that can be passed by a simple majority in the two houses. 

Hollywood and Wall Street will get what they want and the American taxpayers will be given the bill. So, gentlemen, how are the American people protected by suspending the Constitution? Is this the 2016 GOP platform — gather votes signing praises of the Constitution while moving to undercut and suspend it at will?

What is most troubling, however, is the disdain the advocates of this deal have for the American people. They babble on and on about abstract economic "benefits" when, in fact, trade is but a minor part of the matter. No less an authority than The Washington Post stated in an April 13 editorial that the treaty and fast track are "about geopolitics as well as economics."

These treaties are in fact far more about "politics" than economics or trade. These treaties are world governance infrastructure; they are big steps away from the Constitution, national sovereignty and independence. All the trade talk, all the blather about jobs and the confusing stream of questionable statistics are designed to cover the real thrust of these treaties: the expansion of international and globalist interests.

Why the GOP in Congress embraces the very process that would destroy it is a subject for another day, but it is enough to recognize that when they come to citizens begging for votes and donations claiming to defend the Constitution and our system of liberty, that they are being duplicitous Yet again, they treat the grass roots and the conservative base with contempt.

For Ryan to do this is expected, but Cruz's shilling for this big lie may be the last straw for those who became known as Tea Party supporters. The irony is that if they give up hope that America can be restored because they no longer have a champion, who is going to vote for Ted Cruz?

The answer is no one."

"Manning is president of Americans for Limited Government"


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